Tyler Cowen's Blog, page 147

Moral Effects of Socialism

Dan Ariely and co-authors have an interesting new paper looking at moral behavior, specifially cheating, in people who grew up in either East or West Germany.

From 1961 to 1989, the Berlin Wall divided one nation into two distinct political regimes. We

exploited this natural experiment to investigate whether the socio-political context impacts

individual honesty. Using an abstract die-rolling task, we found evidence that East Germans

who were exposed to socialism cheat more than West Germans who were exposed to

capitalism. We also found that cheating was more likely to occur under circumstances of

plausible deniability.

…If socialism indeed promotes individual dishonesty, the specific features of this socio-political

system that lead to this outcome remain to be determined. The East German socialist regime

differed from the West German capitalist regime in several important ways. First, the system

did not reward work based to merit, and made it difficult to accumulate wealth or pass

anything on to one’s family. This may have resulted in a lack of meaning leading to

demoralization (Ariely et al., 2008), and perhaps less concern for upholding standards of

honesty. Furthermore, while the government claimed to exist in service of the people, it failed

to provide functional public systems or economic security. Observing this moral hypocrisy in government may have eroded the value citizens placed on honesty. Finally, and perhaps most

straightforwardly, the political and economic system pressured people to work around official

laws and cheat to game the system. Over time, individuals may come to normalize these types

of behaviors. Given these distinct possible influences, further research will be needed to

understand which aspects of socialism have the strongest or most lasting impacts on morality.

It’s interesting that Ariely et al. try to explain cheating as a result of socialism. My own approach would look more to the virtue ethics of capitalism and Montesquieu who famously noted that

Commerce is a cure for the most destructive prejudices; for it is almost a general rule, that wherever we find agreeable manners, there commerce flourishes; and that wherever there is commerce, there we meet with agreeable manners.

See Al-Ubaydli et al. for a market priming experiment and especially McCloskey on The Bourgeoise Virtues for more work consistent with this theme.

China army markets in everything

To enlist in the People’s Liberation Army (PLA), potential recruits have to take tests. To make sure their sons and daughters pass, families pay up. At one recruitment office in the eastern Chinese province of Jiangxi, this year’s going rate, depending on your guanxi, or connections, is as much as 99,000 yuan ($16,000), says Wang, a recruitment officer in the province who asked that his full name not be used because he isn’t authorized to speak publicly. Limited openings, plus a high failure rate on the fitness exam, push parents to buy spots for their children during the annual enlistment drive that runs through September. Success offers a stable job and, for some, an escape from rural poverty.

The price varies, Wang says. His old army friends “asked me what the current price tag is, and I said ‘around 80,000 to 90,000 yuan for you guys.’ If your guanxi was really strong, it’d cost you around 50,000 to 60,000 yuan; if it was just so-so, you would have to spend 100,000 yuan at least.”

So how formidable a fighting force are they?  There is more here.

Filecoin: A Cryptocurrency-Operated File Storage Network

The working paper (pdf) describes it in this way:

Filecoin is a distributed electronic currency similar to Bitcoin. Unlike Bitcoin’s computation-only proof-of-work, Filecoin’s proof-of-work function includes a proof-of-retrievability component, which requires nodes to prove they store a particular file. The Filecoin network forms an entirely distributed file storage system, whose nodes are incentivized to store as much of the entire network’s data as they can. The currency is awarded for storing files, and is transferred in transactions, as in Bitcoin. Files are added to the network by spending currency. This produces strong monetary incentives for individuals to join and work for the network. In the course of ordinary operation of the Filecoin network, nodes contribute useful work in the form of storage and distribution of valuable data.

The mother site is here.  File under…arbitrage.

For the pointer I thank J.

Megan McArdle on the health care cost slowdown

Technological decline seems more plausible [as a cause]; see this Brookings Institution paper for the extended argument. Basically, health-care innovation is expensive, and for roughly the last decade, we’ve been doing less of it. As old innovations come off patent or are refined into cheaper and better versions, costs fall.

If you think health-care innovation is all useless me-too drugs, you should be pleased that we’re getting less of it. As it happens, I don’t think that’s the case, so while I’m pleased about the budget impact, I’m less pleased at the prospect of fewer new medical technologies. The good and the bad news is that the authors of that Brookings paper don’t necessarily expect the experience of the last decade to be continued in the future — good, because “whee, new treatments!” And bad, because, well, money.

The most worrying possibility is that this reflects a broader slowdown in how fast everything can grow. Certainly, it’s clear that the Great Recession caused a major slowdown in health-care costs everywhere; if you graph the data from the Organization for Economic Cooperation and Development, there’s a sharp, across-the-board inflection point in 2009.

There is more here.

Assorted links

1. Walrasian markets for beer, or marketing gimmick?  And secret markets in everything, for broke and desperate athletes.  Details on Kindle Unlimited.

2. Claims about Danes (speculative).

3. The argument that Chinese shadow banking just isn’t that risky.

4. Mobile showers for the homeless.

5. The new family robot?

6. “Will the Israeli government attempt “lower the mean, increase the variance” strategies?”  The reference is from this MR post.

How does the Chinese economy keep recovering each time?

It seems to be yet another cycle of China taking a temporary downturn and the economy picking itself up again and resuming its upward course, albeit at lower growth rates.  Why does this pattern keep repeating?  What could be going on?

1. The government keeps spending from its $3 trillion reserves stash and through direct fiscal policy it keeps Chinese workers employed and thus avoids the worst of the business cycle.  (NB: This is in general not a good understanding of what is going on, but it should make the list of possibilities.)

2. Worker productivity is going up ??% each year, through the importation of technical progress and the capture of low-hanging fruit.  So China keeps on hitting negative shocks, sticky nominal wages won’t fall, trouble is about to hit but then higher productivity kicks in quickly to keep unemployment down.  The economy then resumes its upward course, although hitting some bumps and snags along the way.

3. State-owned enterprises are told to keep on producing more and investing more.  This worsens their long-run profitability problems, due to collective excess capacity.  But in the short run (how long is that short run now?) both aggregate demand and aggregate supply stay fairly high.  When the profitability constraint hits, though, it will be a doozy.  Unless of course the government resorts to #1, postponing the problem even further.

4. China already has hit a recession in terms of living standards, we are simply mismeasuring the rate of inflation in the country.  And since real wages are falling (for some workers) and nominal gdp stays on a decent (or maybe even excessive) growth path, the country does not experience a traditional recession.

5. Through the use of monetary/fiscal policy and SOEs, the government keeps on boosting the supply of credit.  Since there has been a significant underemployment of resources in China, higher credit induces a self-sustaining positive response from the supply side.  There are then two options for the future:

a. China is still at a margin where this credit process is largely self-financing, or

b. China is now at a margin where soon enough the bills can no longer be paid.

I am not seeking to persuade you of any of these views, I am simply listing some possibilities.

How and whether contemporary cinema will survive

Liam Boluk has written an excellent four-part series, which should be read by anyone with an interest in movies or cultural economics.  He addresses whether movies are a dying or shrinking business, and the installments are here:

Part I: The US Film Industry is Not a Growth Business
Part II: How the Major Studios can Drive Domestic Growth
Part III: Saving Independent Filmmaking
No More 1UPs: Why Video Game Studios Keep Dying

 

Here is one excerpt from number three:

One of the primary barriers to indie success and growth comes from screen distribution. In 2013, 50% of indie films were released on fewer than ten screens – nearly half of which maxed at only two. The reason for this is simple: the audience for the average indie film tends to be small and heavily concentrated in select cities (New York, San Francisco, Portland). As a result, expanding a film’s footprint into additional markets – even cities such as Seattle, Washington DC or Atlanta – can be financially destructive. Yet, even as the theater count is scaled, total performance can remain modest.

And here is Boluk’s blog.

There is no feline great stagnation

Facial recognition is helping improve everything from gaming to fighting crime – and now it could help in the battle against cat obesity.

A new gadget that uses ‘cutting-edge cat facial recognition technology’ promises to monitor our feline friends’ appetites and alert owners to any problems.

The Bistro system, created by Taiwanese company 42Ark, uses a camera at the front of a feeder to identify each of the cats.

There is more here, along with obligatory cat photo, with the cat’s face being scanned by facial recognition technology.  For the pointer I thank Mark Thorson.

Assorted links

1. The case for a Taylor Rule, if you wish to read it.  Not my view.

2. A lot of new ACA enrollees don’t understand how health insurance works.

3. What the new BRICS bank is all about.

4. Data on child vehicular heatstroke deaths.  It’s zero for Alaska, by the way. #LoneStarState

5. What is going wrong with Swedish education?

6. The different stages of AD confusion (enlightenment).

How do rocket threats affect Israeli voting behavior?

The excellent Brendan J. Nyhan directs my attention to this forthcoming paper by Anna Getmansky and Thomas Zeitzoff (pdf):

How does the threat of becoming a victim of terrorism affect voting behavior? Localities in southern Israel have been exposed to rocket attacks from the Gaza Strip since 2001. Relying on variation across time and space in the range of rockets, we identify the effect of this threat on voting in Israeli elections. We first show that the evolution of the rockets’ range leads to exogenous variation in the threat of terrorism. We then compare voting in national elections within and outside the rockets’ range. Our results suggest that right-wing vote-share is 2 to 6 percentage points higher in localities that are within the range– a substantively significant effect. Unlike previous studies that explore the role of actual exposure to terrorism on political preferences and behavior, we show that the mere threat of an attack affects voting.

Here is a related post from Monkey Cage.